Hunton Employment & Labor Perspectives

Yesterday, the Department of Labor (“DOL”) issued a proposed rule that is expected to significantly increase the number of employees who are eligible for overtime.  The proposed rule increases the minimum salary threshold for exempt workers from the current level of $23,660 to $50,440.  The rule applies to the FLSA’s executive, administrative, professional, and computer employees exemptions, but not the outside sales exemption which does not have a salary basis requirement.

The rule also sets a mechanism for automatic annual updates to the salary level using either a fixed percentile of wages or the Consumer Price Index.  The DOL estimates that this change will immediately impact nearly five million workers and many more in the coming years.
Once the proposed rule is published in the Federal Register, which is likely to occur in the next few days, the rule will be open for comment for 60 days.

Under its statutory authority to define the terms of exemptions, the DOL has increased the minimum salary level seven times since the FLSA became law in 1938, but it has only been increased twice in the last 40 years.  The most recent increase was in 2004 when the salary level was set at $455 per week.  According to the DOL, the share of full-time salaried workers who are paid overtime has decreased from 62% in 1975 to 8% today.

The proposed rule comes in response to a Presidential Memorandum issued to the DOL in March that instructed the agency to “modernize and streamline” its regulations.